Quality Tenants are an Important Tool to Owning Successful Rental Property

by Julie Johnson of the Rental Housing Association

Now may be a great time to invest in rental housing. Interest rates are at extraordinarily low levels.
The average interest rate on a 30-year fixed mortgage is averaging slightly above 3.5%. Experts predict interest rates will creep up slightly but still remain lower than 4% for 2013.

The news is reporting an improving housing market after six years with an average nationwide decline of 34%, it seems home prices have bottomed out and are beginning to rise. In my opinion, however, the real attraction of an investment in rental property is not the possibility that the property will appreciate in value. The real attraction is in the cash flow it will provide far into the future. The more cash flow you have, the more financially secure you will be.

The best way for your rental property to achieve steady, dependable cash flow is by having quality tenants. The tenant is what creates a positive return or is what can create the hardship in owning rental property. If you are a seasoned investor, you’ve probably rented to a tenant who was less than desirable. This tenant might have caused problems for you by not paying rent on time, not taking care of the property or by not respecting their neighbors. My husband Craig and I have two rules when looking for a new tenant.

First, don’t rush in reaction to an applicant’s deadlines.

Second, don’t rent to someone because you feel sorry for them. Those are two guaranteed ways of making a mistake when choosing a tenant.

Taking a smart businesslike approach in selecting tenants is a must to protecting your investment and saving you money and aggravation. Here are some other tips to follow to find a quality tenant.

· A well maintained property is more likely to attract a prospective tenant who wants to keep it that way. If you expect your tenant to care for the property then you need to give them a well-cared for unit. Inform all prospective tenants about their responsibility in taking care of the property before they submit their application.
· It is now the law that if you collect a tenant screening fee, you must let the prospect know up front what the tenant screening criteria* will be.

Use this to your advantage. Ensure you have thoughtfully put together your screening criteria and don’t deviate from that standard. · Let the prospects know that you are looking for someone who can follow the rules of the property and ensure they receive the written rules of the property upfront. If you have quiet hours on your property then it is in your best interest to let the prospect know.

· Have a no-nonsense approach when dealing with prospective tenants.

This lets the prospect know this is a business to you and you are not looking for a friend. Also, bad tenants typically look for a landlord they can walk all over. Don’t be afraid to sound stern right from the start.

· Ensure the new tenant sees you documenting the condition of the rental unit. Have a very thorough inspection report and support it with documenting photos. Include the photos with the report. Also, be sure to document both the inside and outside of the property. The more details you provide, the more you will be able to recover from any damages caused by the tenant.

Decent tenants will not have a problem with your policies and will not feel intimidated. Be picky and have high standards. It is very difficult and often expensive to deal with a problem tenant. Making the wrong choice will reduce not only your enjoyment of being a landlord, but also your cash flow. Protect your investment–find quality tenants.

* Tenant Screening Criteria List: RHA provides a Criteria for Tenant Selection form that can be used as a reference. Members have free access to this form from the Member’s Only section of the website (http://www.RHAwa.
org). If you have further questions you can contact RHA’s Tenant Screening Department (206) 283-0816.
Julie Johnson is currently the Director of the Residential Group at Phillips Real Estate Services, which offers leasing, sales and property management services to 1-10 unit rental properties. With her husband, they own and manage 12 rental units. Julie is the host of the “Rental Property Coach“ Radio Show on 1590 AM, Saturday mornings at 9:00. She has taught at TRENDS Rental Housing Management Conference and Tradeshow, teaches several different seminars at RHA and hosts a local supper club for landlords. By Julie Johnson of RHA – Puget Sound.